9911796707
TMI Blog1989 (9) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... of including their paid-up value payable on the date of maturity are as under : Policy Number Sum assured Paid-up value Date of maturity 19620636 10,000 3,415.70 14-09-1972 13932229 3,500 1,118.65 28-12-1973 13969144 5,000 892.20 9-11-1975 13972300 2,000 557.70 21-12-1975 In April, 1969, G. V. Ranade assigned absolutely all these four insurance policies in favour of his wife, Smt. Kamalabai G. Ranade, and the assignment so made was duly registered by the Life Insurance Corporation as under: "In registering this assignment, the Corporation makes no admission as to its validity. Nagpur. Sd/Dated : 8-4-1969 P. Divisional Manager." It appears that there were some income-tax dues against the said G. V. Ranade for recovery of which the Income-tax Officer had commenced recovery proceedings. Prior to the date of maturity of these policies, the Income-tax Officer, on January 27, 1971, issued a notice under section 226(3) of the Income-tax Act, 1961, to the manager of the Life Insurance Corporation at Nagpur directing the Life Insurance Corporation to pay to the Income-tax Officer forthwith any amount due from the Life Insurance Corporation to or held by the Life Insur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hold any payment to Smt. Kamalabai G. Ranade till further communication from the Income-tax Officer. On September 5, 1972, Smt. Kamalabai G. Ranade filed a writ petition (S. C. A. No. 861 of 1972) in the High Court of Bombay impleading the Life Insurance Corporation and the Income-tax Officer as respondents therein claiming several reliefs which are mentioned at pages 33 to 35 of the paper-book. The reliefs included a direction to the Life Insurance Corporation for payment of Rs. 3,415.70 due on September 14, 1972, on maturity of the first policy to Smt. Kamalabai G. Ranade and also to make statement on oath as contemplated by section 226(3) of the Income-tax Act, 1961, that no part of the said amount is due to G. V. Ranade nor does the Life Insurance Corporation hold any part of the sum for or on account of G. V. Ranade. This writ petition was dismissed in limine by the High Court on September 14, 1972. The amount of Rs. 3,415.70 payable against the first policy which matured on September 14, 1972, was paid by the Life Insurance Corporation to the Income-tax Officer. Smt. Kamalabai G. Ranade filed an appeal (C. A. No. 373 of 1973) by special leave in this court against the dismis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ife Insurance Corporation has made the payment of these amounts to Smt. Kamalabai G. Ranade in these circumstances. The Life Insurance Corporation has not disputed at any stage its, liability to pay to Smt. Kamalabai G. Ranade the amounts due under these policies. However, it has disputed its liability to pay interest thereon for any period after the date of maturity on the ground that the delay was occasioned by the Income-tax Officer's notice under section 226(3). On the other hand, Smt. Kamalabai G. Ranade claimed that the Life Insurance Corporation had wrongfully refused to make the statement as contemplated under section 226(3)(vi) of the Income-tax Act, 1961, resulting in delay in payment of the moneys after the maturity of the policies. This dispute regarding the Life Insurance Corporation's liability to pay interest led to the filing of Writ Petition No. 1248 of 1977 decided on January 7, 1981, which gives rise to this appeal. The impugned judgment of the Bombay High Court in Writ Petition No. 1248 of 1977 holds that the last two policies having matured on November 9, 1975, and December 21, 1975, i.e., a few days before or after December 5, 1975, when the statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstructive res judicata, as a result of the earlier writ petitions, bars the claim for payment of interest in this writ petition. The fourth argument is that the writ petition (S. C. A. No. 302 of 1977) being withdrawn unconditionally without liberty to file a fresh petition, this writ petition (W. P. No. 1248 of 1977) is not maintainable. The fifth argument is that the rate of 15 % per annum at which interest has been awarded is excessive. The sixth and the last argument is that the appellant has been required to make double payment of Rs. 3415.70 due against the policy which matured on September 14, 1972, inasmuch as the Life Insurance Corporation had already deposited that amount earlier in September 1972, with the Income-tax Officer in pursuance of the Incometax Officer's demand. In reply, Shri A. K. Sanghi, learned counsel for the respondent, contended that the liability for payment of interest has been correctly fastened on the appellant because of its failure to discharge the statutory obligation of making the requisite statement on oath under section 226 (3) (vi) of the Income-tax Act, 1961, till December 5, 1975. He argued that the Life Insurance Corporation having ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the appellant, and no relief has been sought against the Income-tax Officer. This being so, for effective adjudication of the Life Insurance Corporation's liability towards the respondent, the presence of the Income-tax Officer is not necessary. The respondents claim is only against the Life, Insurance Corporation without any claim being made, in the alternative or otherwise, against the Incometax Officer. The respondent's claim has, therefore, to succeed or fail only on the basis of the Life Insurance Corporation's liability vis-a-vis the respondent without involving the Income-tax Officer or anyone else in that process. Merely because the defence of the Life Insurance Corporation was based on an act of the Income-tax Officer, it was not incumbent on the respondent to implead the Income-tax Officer in this proceeding when neither was any relief claimed against the Income-tax Officer nor was any suggestion of the Income-tax Officer's liability for payment of interest made in the writ petition. This argument is, therefore, rejected. The second argument relating to construction of section 226(3) of the Income-tax Act, 1961, is, in fact, the main argument of Shri Ra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The next writ petition filed by Smt. Kamalabai G. Ranade was S. C. A. No. 302 of 1977, in the Bombay High Court. The prayer made therein was for a direction to the Life Insurance Corporation to pay the principal amount together with interest thereon. In this writ petition also, the Income-tax Officer was impleaded as a party. This writ petition had to be filed because, in spite of the Life Insurance Corporation having made the requisite statement under section 226(3)(vi) of the Income-tax Act, 1961, on December 5, 1975, the Income-tax Officer had not withdrawn the notice under section 226(3) of the Income-tax Act, 1961, issued to the life Insurance Corporation and, therefore, the Life Insurance Corporation was not making the payment to the respondent. On April 4, 1977, that writ petition was dismissed as withdrawn as a result of the Income-tax Officer's counsel filing a copy of the order dated April 1, 1977, withdrawing the Income-tax Officer's notice under section 226(3) of the Income-tax Act, 1961, enabling the Life Insurance Corporation to make the payment due against the policies to the respondent. The operation of the notice under section 226(3) of the Income-tax Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion is not governed by section 244 of the Income-tax Act, 1961. Apparently for this reason, learned counsel for the appellant relied on section 244 of the Income-tax Act, 1961, as of persuasive value. We are not impressed by this argument. The High Court has relied on the fact that interest at 15% per annum is reasonable, in the present case, particularly in view of the fact that the Life Insurance Corporation itself charges interest at that rate. It is sufficient for us to state that there is no material produced, in the present case, to suggest that award of interest at 15% per annum is excessive to permit interference with the rate in this appeal particularly when the High Court has come to the conclusion that this is the reasonable rate. This argument also is, therefore, rejected. The only point remaining for consideration now is the construction of section 226(3) of the Income-tax Act, 1961, the relevant portion of which, reads as under "226. Other modes of recovery. -(1) Notwithstanding the issue of a certificate to the Tax Recovery Officer under section 222, the Income-tax Officer may recover the tax by any one or more of the modes provided in this section ... (3) (i) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le to the Income-tax Officer to the extent of his own liability to the assessee on the date of the notice or to the extent of the assessee's liability for any sum due under this Act, whichever is less. (vii) The Income-tax Officer may, at any time or from time to time, amend or revoke any notice issued under this sub-section or extend the time for making any payment-in pursuance of such notice. (viii) The Income-tax Officer shall grant a receipt for any amount paid in compliance with a notice issued under this sub-section, and the person so paying shall be fully discharged from his liability to the assessee to the extent of the amount so paid. (ix) Any person discharging any liability to the assessee after receipt of a notice under this sub-section shall be personally liable to the Income-tax Officer to the extent of his own liability to the assessee so discharged or to the extent of the assessee's liability for any sum due under this Act, whichever is less. (x) If the person to whom a notice under this sub-section is sent fails to make payment in pursuance thereof to the Income-tax Officer, he shall be deemed to be an assessee in default in respect of the amount specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t nor did the casual mention of section 281 of the Income-tax Act, 1961, by the Incometax Officer in his letter dated August 28, 1972, result in this consequence. Any further step towards formation of the final opinion by the Income-tax Officer could be taken only after the Life Insurance Corporation had made the requisite statement on oath under section 226 (3) (vi) of the Incometax Act, 1961, on the basis of the registered assignment of policies. This act was performed by the Life Insurance Corporation only on December 5, 1975, which led to revocation of the notice under section 226(3) of the Act, by the Income-tax Officer. The question is of the liability of the Life Insurance Corporation in these circumstances. Section 226 consists of several sub-sections of which sub-sections (1) and (3) alone are relevant for our purpose. Sub-section (1) enables the Income-tax Officer to recover the tax by any one or more of the further modes provided in this section, Sub-section (3) deals with one such mode where the defaulter's money is held by another person. Clause (i) of subsection (3) enables the Income-tax Officer by notice in writing to require any person from whom money is due o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and on behalf of the assignee and not the defaulter. Mere information of the assignment to the Income-tax Officer and keeping the assignee informed of the Income-tax Officer's. action did not amount to discharge of the statutory obligation under section 226(3)(vi) of the Act, by the Life Insurance Corporation. The statute having expressly provided the mode of raising such an objection in the form of a statement on oath specified in clause (vi), performance of that obligation by the notice had to be made only in that manner. This statutory obligation was performed by the Life Insurance Corporation only on December 5, 1975, as stated earlier. The personal liability arising after making the requisite statement on oath as envisaged by clause (vi) is only "if it is discovered that such statement was false in any material particular" and not otherwise. Learned counsel for the appellant argued that the requisite statement under section 226(3)(vi) of the Income-tax Act, 1961, could not be made by the Life Insurance Corporation since it involved the risk of exposing the Life Insurance Corporation or its officer making the statement on oath to personal liability for the income-tax dues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... liability has, therefore, no merit. This being the only reason given by the Life Insurance Corporation to justify the inordinate delay in making the requisite statement under section 226(3)(vi) of the Income-tax Act, 1961, it is obvious that this defence is untenable. Sub-section (3) of section 226 of the Income-tax Act, 1961, clearly shows that on a notice thereunder being issued by the Income-tax Officer to the Life Insurance Corporation, in the present case, it was incumbent on the Life Insurance Corporation to make the requisite statement on oath under clause (vi) thereof raising an objection on the basis of the registered assignment. It was then for the Income-tax Officer to proceed further and form his final opinion and revoke the notice under clause (vii). It was not possible for the assignee of the policies to obtain revocation of the notice by the Income-tax Officer without the requisite statement on oath being made by the Life Insurance Corporation as envisaged in clause (vi) of sub-section (3) of section 226 of the Income-tax Act. It is obvious that the inordinate delay in making the statement on oath by the Life Insurance Corporation under section 226(3)(vi) of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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